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The consent order provided for the creation of a “settlement
estate” and a “litigation estate,” to consist of assets
transferred from the business, Mr. Blodgett, and petitioner. Id.
A receiver was appointed to liquidate the assets in the two
estates and disburse the money. The litigation estate was used
to pay litigation expenses for the defense of actual or
reasonably anticipated governmental enforcement actions against
Mr. Blodgett or petitioner. The settlement estate was used to
pay claims of defrauded customers of the business. The
litigation estate was established with $300,000, funded solely
through the liquidation of a so-called Coin Fund. The remaining
proceeds from the liquidation of the Coin Fund were transferred
to the settlement estate. The settlement estate also included
the Florida property and the Simbari painting, among other
assets.
After the onset of the FTC case but prior to the consent
order, creditors of the business filed a chapter 7 involuntary
bankruptcy petition against the business pursuant to 11 U.S.C.
section 303. Although the business converted the case to a
chapter 11 proceeding, the bankruptcy court reconverted the case
to a chapter 7 proceeding and appointed John Stoebner the trustee
on May 28, 1992. See Stoebner v. Vaughan, 179 Bankr. 600, 601
(D. Minn. 1995). On August 21, 1992, an order was issued by the
U.S. District Court for the District of Minnesota to the receiver
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